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Beijing Media in for debut gains

Brokers expect retail investors to cash in while institutional buyers will buoy the price as the issue was heavily subscribed

Beijing Media Corp, the first state-owned newspaper company to list outside the mainland, has been heavily oversubscribed and is expected to cheer investors with a handsome debut.

Brokers said the grey market was quoting $22 to $23 a share, representing a 16 per cent to 21 per cent gain from the H-share's initial public offering price of $18.95.

They expected strong selling pressure on Beijing Media on its first day of trading as retail investors would be tempted to flip the shares for a quick profit, but institutional investors that failed to get the quota they wanted were likely to provide some support.

But not all of the 19,106 subscribers for Beijing Media's shares will enjoy a Christmas bonus because many missed out on an allocation.

A total of 1,289 retail investors who had subscribed for the shares, or 6.7 per cent of the retail investors, have been left empty-handed.

Even the 11,894 investors who sought 20,000 shares or fewer were only given the minimum lot of 500 units.

The H-share company had drawn 19,106 retail investors seeking a total of 2.014 billion shares, or 421.86 times the shares available for retail investors.

The share subscriptions locked up a total of $39.87 billion, generating an estimated $16 million in interest income for lenders and brokers that provided margin financing.

Brokers said because of the heavy oversubscription level, retail investors received an average of 0.2 per cent of the shares they had asked for, translating into a high margin cost per share.

'Beijing Media would have to go up at least 10 to 15 per cent for highly leveraged retail investors to cover their financing costs,' a broker said.

'Otherwise, they will be losing money if they include the financing costs.'

Beijing Media, the advertising agency of the state-owned Beijing Youth Daily, raised $904.67 million in its Hong Kong flotation.

'About 40 per cent of the share offering has been snapped by Naspers,' one broker said. Naspers, the South African media group, had agreed to take up a 9.9 per cent stake in Beijing Media.

'Other institutional investors were not allotted many shares. They are expected to chase after the shares in the secondary market,' the broker said.

'Fundamentally, the media company has a lot of upside room. Beijing Evening News recently raised it advertising rates by about 5 per cent and Beijing Media is likely to follow suit.'

A Beijing Media spokeswoman said the company usually reviewed its advertising rates in about March every year and had not yet discussed next year's rates.

'But there is certainly room for an increase,' the spokeswoman said.

Hot issue

Of the retail investors, 1,289 were not allotted any share

Retail investors on average had 0.2 per cent of what they sought

The initial public offering locked up $39.87 billion

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